Buying an existing private business as an investment?

[5holiday]

I think this is a very interesting question. Some people buy stocks, some people buy real estate, surely - somebody invests in buying existing private businesses?

I have posted this question on another forum, and I have yet to find a response from somebody who has personally done this, or been involved in this kind of transaction.

I know there are a few business brokers on the forum (and so many entrepreneurs!), so maybe someone can shed some light on this topic from personal experience.

 

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[jpmartin]

I think this is a very interesting question. Some people buy stocks, some people buy real estate, surely - somebody invests in buying existing private businesses?

I have posted this question on another forum, and I have yet to find a response from somebody who has personally done this, or been involved in this kind of transaction.

I know there are a few business brokers on the forum (and so many entrepreneurs!), so maybe someone can shed some light on this topic from personal experience.

Yes, you can make much more money than listed securities... but it's not so easy, and also not so liquid. If you have any questions, shoot - I'll try to answer.

 

[5holiday]

Wow - fantastic.

I have a few questions, actually.

The main one is - how do you narrow down your targets?

My assumption is that smaller, simple businesses better for this purpose as opposed to medium sized businesses ?

For example: Compare a dry cleaning shop with staff vs a medium sized photography school.

Are some types of businesses more suitable? Eg product vs service, local vs national, expensive vs cheap product offerings?

Many thanks!



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[jpmartin]

The main one is - how do you narrow down your targets?

Focus on one sector, that you're comfortable / familiar with.

My assumption is that smaller, simple businesses better for this purpose as opposed to medium sized businesses ?

Yes, it can get complicated. But more established business carry relatively less risk than startups - you would value the company differently.

Are some types of businesses more suitable?

Yes, TMF talks about about internet business. You've read the book right? I prefer product biz... though some service bizs can morph into product based.

 

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[jpmartin]

To get you started, you might want to check out David Roses' book on Angel Investing

And then buy all the books by Brad Feld

 

[5holiday]

Thank you for those books!

So you would be more interested in venture style opportunities - and not something boring like the local laundromat or print shop?


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[jpmartin]

You're welcome. I look at it from two extremes... the maximum return (and risk) is with VC. If I was going to get into boring businesses, I would just invest online into a listed (public) companies (they provide higher liquidity, with lower return, and relatively lower risk). I wouldn't really do private established biz, unless I had a few million to spare... the larger the private biz, the more money you'll have to shell out, and be on the board level at least to get inside information.

 

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[5holiday]

Great answers JP Martin thank you.

Last Question from me: How did you get into this? What did you start with and where are you now?


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[jpmartin]

How did you get into this? What did you start with and where are you now?

Started as management consultant. Migrated to private equity/venture capital. I actually invest OPM... but I trade my own.

 

[jpmartin]

Thanks... Let me know if you have any other questions, would be happy to answer them (in the shortest way possible

 

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[DeletedUser15]

Cool thread guys!

What is interesting is how profitable (slowlane profitable) many ethnic families are with their cafe and restaurant businesses. The short term return is stronger than real estate and stocks.

Hiring staff requires a small training induction and the minimum wage.

Also being paid in cash [emoji1]

What about buying or an invested interest in an established cafe/restaurant business? What do you guys think?


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[jpmartin]

What about buying or an invested interest in an established cafe/restaurant business?

Cafe, which requires a cold kitchen - is fine, so long as training staff is not so difficult and can be completely documented in a manual. Restaurant - not totally on board, my friend had one - and the biggest complaint was the fighting b/w his two chefs! No Chef... no food!!

 

[ZCP]

Cool thread guys!

What is interesting is how profitable (slowlane profitable) many ethnic families are with their cafe and restaurant businesses. The short term return is stronger than real estate and stocks.

Hiring staff requires a small training induction and the minimum wage.

Also being paid in cash [emoji1]

What about buying or an invested interest in an established cafe/restaurant business? What do you guys think?


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Find and watch every episode of Restaurant Impossible.

 

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[jpmartin]

Restaurant Impossible

Or Hells Kitchen

 

[5holiday]

Cafe, which requires a cold kitchen - is fine, so long as training staff is not so difficult and can be completely documented in a manual.

Tell us more


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[jpmartin]

Tell us more

What do you need to know?

 

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